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What are the things that you should look for in a foreclosed home
By Vic Hurlstorm | July 13, 2009
The first thing you should look for – or look forward to – is weeks and even months of diligent research. The opportunities in foreclosed homes often fall into the old adage, “If something sounds too good to be true, it usually is.The fact is that the price tag of some foreclosed homes can be 30% to 40% below market rate. But according to the editor of one real estate investor’s publication, “Most foreclosed homes sell at 5% below market.”
Location
If the foreclosure opportunity you’re looking for is an investment opportunity, then you would be wise to review five years or more of real estate sales history in the area. Have the homes appreciated sufficiently to make your investment risk worthwhile? The property doesn’t have to be in an exclusive neighborhood, but it should be in an economically stable area. This is not an issue of who is moving in and who is moving out, but rather how much is being paid for the homes changing hands.
One recently introduced factor that you have to bear in mind is the cost of homeowner’s insurance and coverage for windstorms if you’re looking in the Southeast.You may find yourself buying a house that you can’t afford to insure in Hurricane Lane, though you may find some real bargains there.You will also come upon areas where flood insurance is simply no longer available.
Physical Condition
Think carefully about the circumstances of a foreclosure. Most people lose their grip on their homes after struggling to meet mortgage payments for an extended period of time. That probably means the home has received little or no maintenance, and the property you’re inspecting may appear to be in poor shape. If it’s in a quality location however, ignore the condition for the moment, take note of the obvious signs of deterioration, and incorporate rehab costs into your calculations.
Make a methodical examination of what the competitors has to offer
Be aware that similar to any commercial real estate market, you are taking upon professionals in your biddings. There are people in most areas who make a living from buying foreclosed properties, cleaning them up and putting them right back on the market. Professionals operating in that fashion may not be willing to bid up near market price for the neighborhood, but with any well located property you’re not going to walk away with a “steal.” Take a look at recent foreclosure sales in the area to?
Clean Title
For any foreclosed property, the condition of the building’s title deserves a thorough check.Ensure if anybody else has a lien on it other than that of the lender who is selling it. If you can, determine if the former owner is embroiled in any lawsuits that could conceivably lead to a challenge of the sale and tying up the property.According to theory, any property that has once reached the foreclosure stage is going to the market unhindered. That means nothing to an attorney who sees opportunity in attempting to delay disbursement of the former owner’s principal asset. Delay is the operative word here; if you’re going to invest in a property you need to be able to put it to work for you with dispatch.
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